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Former Capital One Real Estate Exec Bullish On Canada

  by Forbes J. Rutherford, President, Rutherford International

Ask real estate executive, Peter Icely, how he feels about returning to Toronto after five years with Capital One, a Fortune 500 company in Richmond, Virginia and he will tell you the city and country may not have changed much but his fresh perspective reveals many new and exciting opportunities and creative challenges.

Fresh Opportunities for Canadian Corporations

 “The opportunities for growth and expansion in the Canadian real estate market are enormous,” said Icely who, with 24 years experience in the industry, has been involved in almost every aspect of commercial real estate. His particular areas of expertise include strategic planning, site acquisitions, capacity planning, real estate transactions, project and construction management, development, outsource vendor management, building operations and facility management.

Icely said he is both optimistic and enthusiastic about the opportunity to apply his comprehensive knowledge of the industry and American perspective to the Canadian real estate market.

 “There are a number of world-class companies in Canada,” Icely noted. “What I can bring to the table, after spending five very successful years at Capital One, is a way to help them create a world-class work environment that optimizes the productivity of knowledge workers.  I was working with a leading edge American corporation that was ranked by Fortune as one of the 100 best companies to work for in the United States. We were clearly doing something right for our associates. I think the same opportunities exist in Canada and I can bring that expertise to the table for companies that want to be Fortune 100 companies.”

Workplace Innovation and Design helps achieve Strategic Objectives

Icely started out as a regional real estate manager in what he describes as a highly decentralized organization. “As the regional real estate manager, I was the real estate executive on the ground in a geographic territory and I was responsible for anything and everything to do with real estate,” Icely said. “I grew the portfolio to two and half million square feet in the mid-Atlantic region. That was a mix of call centers, knowledge worker or office space, back office or production space and computer center space.”

Icely moved from regional manager to a strategic group manager position directing a work unit officially titled ‘Workplace Innovation and Design’. He defined the parameters and developed the strategy to support regional managers across the corporate real estate group both within the US and globally. “The group’s responsibilities included transactions, facility management, food service, environmental health and safety, security, engineering, and building, systems and workplace design,” Icely explained.

Part of Icely’s enormous value to commercial real estate organizations in Canada is his empirical experience in so many facets of the business and the application of this experience to what he describes as the vibrant and rapidly developing commercial real estate market in this country.

“One of the most important things that we were learning and working with at Capital One was not only the way that real estate can contribute to the bottom line of a corporation, but also real estate’s contribution to the organization’s strategic objectives,” Icely noted. In Capital One, these included cost reductions, supporting corporate recruiting and reducing associate attrition, fostering innovation and creativity and strategic outsourcing to improve efficiency.

Cost Reduction - Past, Present and Future

He explained this could happen on a number of different tiers. The first and most obvious is the management of costs “so you can contribute to profitability that way. Every company has, more or less, a mandate to control costs. That’s what a lot of the activity around corporate real estate has been in the last little while.”

Icely brings more than a broad range of experience to the Canadian commercial real estate industry. He is also a highly creative and innovative thinker. While at Capital One, he worked with a consortium of industry specialists from the Massachusetts Institute of Technology (MIT), the Gartner Group, a renowned technology information consulting firm, and 22 leading edge companies to develop what is widely regarded as the conceptual basis of the workplace of the future. The study was called ‘Supporting People and Their Work,’ a proprietary report that was published for the consortium’s members in December 2001.

“One of the things we looked at was how real estate and technology services are currently provided and how they could be provided in the future,” Icely said. “One of the possible outcomes is that things like workspace could become a commodity. For example, if you want to go to Boston and neither you nor your company owns a plane, you buy a ticket on a plane that is owned by somebody else and you fly to Boston. In the same context, if you need office space you may buy a ticket for two days worth of office space at the intersection of Bay Street and Wellington in downtown Toronto and in you go. Your company may have bought tickets for your team, so you would find yourself in an office at Bay and Wellington working with your team, completing your assignment and then walking away. The company doesn’t own or rent the building.  The company has bought a ticket for you to use that building for a specified time; it comes with furniture, amenities, IT. You just walk in, plug in your computer or use their computer. It’s a new way of looking at an old problem.”

Support Recruiting, Reduce Attrition, Retain Top Performers

One of Capital One’s strategic goals, Icely explained, was to attract and retain the best and the brightest employees in the US market. “There were a number of elements to that,” Icely said. “One was obviously the HR (Human Resource) component, targeting the right schools to recruit from because most of the knowledge workers in the company were young and we tended to hire them right out of the top business schools in the US. We needed to determine the right way for real estate to support the overall corporate initiative around that. So we used real estate as a way to create a statement about the company using the way buildings were designed, the way space was organized in the buildings with the selection of the appropriate finishes to make the space really impressive.”

Icely and his colleagues also accomplished this by designing and providing a mix of amenities that included things like food service. Four different levels of food service were provided, everything from a ‘vendeteria’ to a full-service cafeteria with two steps in between of progressively higher levels of service and offerings.

“The offerings were determined by who was in the building,” Icely said. “Was it production space, a computer center, a call center or professional space? We brought in top vendors in the industry to run our operation. We invested heavily in making the food service venues very, very attractive, very high quality and with a good mix of service offerings.” Food offerings from around the world were provided with different themes that would change, such as an oriental theme, a Mexican theme, or a European theme, depending on the day or week.” We’d also have different service levels so there was always a grill, a salad bar, a hot plate, a to-go service and a full service counter with a hot meal based on these various themes,” Icely explained.

“We also provided amenities such as athletic facilities. We invested heavily in a recreation facility in our Tampa campus. We had two basketball courts, handball and racquetballs courts, weight rooms, cardio machines, and an aerobics room. We had outside running tracks, walking paths, baseball diamonds, soccer pitches. We also had a fully landscaped walking area outside the facility where associates could walk through the natural habitat, which included a fully natural Florida wetlands environment with animals and native vegetation.  It was totally undisturbed when we developed the campus. Our associates and their families would use the recreational facilities on the weekend. These things all contributed positively to our recruiting efforts, but they also had a significant impact on our ability to retain top performers. Capital One’s attrition rate is one of the lowest in the industry, even in highly competitive call center environments like Tampa.”

Amenities and food service were just two examples of the ways Capital One used real estate to attract and retain the best and the brightest employees. The corporate real estate group was also used to design workspaces that optimized the productivity of the people who worked in them, particularly with groups of knowledge workers in professional spaces.

Foster Associate Innovation and Creativity

“We designed a mix of private space where one could go and close the door and have a private conversation or phone call or work on your laptop with your head down for an hour where you wouldn’t be distracted visually or acoustically when you needed to maintain that level of concentration,” Icely said “We had an open office environment with associates assigned seats in the open workspace. In that environment we had team working areas; the furniture we designed in such a way that you had side tables that were attached to your work space, you could move them around, turn 180 degrees and put them together with someone else’s side table; all of a sudden you had a working table that three or four people could sit around in the center of the aisle and work collaboratively.”

Also provided were casual areas where employees could sit, relax and read but where a certain level of interaction with other associates coming and going was maintained. In addition to this, there were spaces within the workplace that were ideal for both planned and spontaneous meetings.

“We created a test area we called we called the Living Lab - an area designed specifically to optimize the productivity of knowledge workers or professionals working in teams. There were white boards along entire walls with stools that created areas where associates could run into one another, exchange ideas about their projects and start writing ideas that came out of this interaction right there in the hall,” Icely noted. “We tried to design space that would drive a certain amount of natural interaction and enhance collaboration and innovation.”

Ideas developed in the Living Lab were effectively utilized in an important innovation also supported by corporate real estate - the vertical integration of business operations. Icely says that up to that point facilities were differentiated by use or business function, such as professional space and call center space. But the company started an initiative to vertically integrate all the aspects of the business operation for selected business functions within a single facility.

“There were call center, production and back-office associates along with knowledge workers like marketers, credit analysts, etc. all in the same space working together and working collaboratively,” Icely said, noting the intent of this was to expedite the process of bringing new products to market. The effective use of facilities and workspace design can create new communications patterns among knowledge workers – reducing cycle times and increasing speed to market for new product offerings.

“The results were extremely positive and gave us a very distinct competitive edge in bringing products to market ahead of our competitors and significantly reducing the amount of time it took us to test and implement new product ideas. These are some of the ways corporate real estate was able to significantly contribute to the bottom line of the corporation.”

There’s Outsourcing, and then there’s Strategic Outsourcing

Effective and strategic outsourcing is another area Icely considers an indispensable component of modern commercial real estate practice. He says outsourcing business relationships with external service providers was an integral part of Capital One’s corporate real estate practice in many areas including capacity planning, real estate transactions, construction, project management and building operations.

“One of the things I did was design effective ways to manage those business relationships, not so much the productivity of the outsource service providers but to optimize the productivity of the business relationship,” Icely stated. “It is very much a relationship between the company and the external service providers and you really do have to work together. It’s not a question of bringing in someone to do the job and then phoning them every once in a while to see how they are doing. They will positively influence the way you do things inside the company and you will positively the way they do things in terms of service delivery. Successful outsourcing or partnering is truly a case in which the whole is greater than the sum of the parts. You have to have a clear idea of what your strategic intent is when you outsource; what the value-add proposition is.”

He said one of the easiest ways to outsource in terms of the simplest intellectual concept is out-tasking. An example is outsourcing janitorial services. 

“I do janitorial, company B does janitorial, I am going to have company B come in and do my janitorial. Savings typically result because company B hires people for less money. That’s really the only value you are getting out of that relationship, Icely explained. “To a certain extent you are getting expertise and scale of economies. But for the most part they can do the job cheaper so I’m going to hire them to do it. The next level of outsourcing is really the partnership where I am going to work together with this person; I am going to ask them to look at my operation and bring their expertise to the table to optimize the way they perform the service in my company.”

The next and the ultimate level of outsourcing is an alliance or partnership where service providers bring not only their tactical expertise to the table, but also their intellectual capability to the table, Icely said; they understand the business; they are leading edge providers of the service; they are looking at ways that they can improve the delivery of that service into an organization by improving the process by which it occurs in a company.

“So it’s not just ‘this is the way we deliver the service’ but what is the entire process you go through. For example, if you look at doing real estate transaction, the easiest way is to retain the service of a real estate broker and say ‘I need space, go and get it for me.’ The broker gets the space, you pay him his commission and you’re done. When you get into alliances and partnerships, the vendors or providers of that service are actually working with you to determine ‘Is it really a site that you want or is there another solution here? Could one of the solutions be expanding one of your existing operations?’ They start to look at it in a much broader context: ‘Yes, I am a broker and can do very good real estate transactions but I’ve been doing this for companies for 20 years and I’ve seen a lot of instances where I don’t believe the company going out and buying a piece of property was the right move for the company to make based on what I know about the company and what they were trying to achieve.’ So you actually find yourself at the table with a partner, with someone who has a different perspective than you do but a very grounded perspective; obviously with expertise in their area but they bring that perspective to the table to actually work through the decision making process and the execution process.”

In the long run, Icely said, you make better decisions as a result of this. But he added it is definitely a more involved process and requires a lot more courage. You have to be willing to sit back and say to yourself ‘I don’t have all the answers, they are other people out there that can help and together we can come up with the best solution.’ You have to be open. It is very, very much teaming. It’s no longer just executing a task.

Successful partnerships and alliances also require an in-depth look at the way corporate real estate departments are organized and how they function. “In partnership with one of our service providers I developed a strategy for evolving the organizational design of the corporate real estate group to optimize the development and implementation of innovative practices in Capital One’s real estate management,” Icely recalls. “As companies evolve from small entrepreneurial organizations to larger entities, the process to develop innovative products, services and practices and implement them on a broad scale becomes a more cumbersome one and less responsive to market changes. One of the things we developed was a plan to adjust the design of the organizational structure within the corporate real estate group as the organization evolved so that we would continually foster innovation.”

Bullish on Canada

Icely said the concept of a partnership or the partnership alliance is fairly new in Canada and he sees a lot of opportunities around the partnership and alliance end of outsourcing in this country. He said this is also the case in terms of the commercial real estate industry’s strategic position in Canada at this time.

“Canada is extremely well positioned at this time,” said Icely. “There is a very good level of capital availability in the country. In Canada the approach to real estate development has been even and disciplined through the bull market of the last decade. It’s better thought out and it appears we’ve avoided the very high peaks and the very low valleys that go along with economic cycles. The approach seems to have been ‘let’s not over-extend ourselves. Let’s do things in a way that is manageable so that if the economy swings downward we are not going to be badly burned; if it swings up we are going to be ideally positioned to grow and seize those opportunities. This is why none of the major real estate organizations got in trouble in this recession in Canada. It is also why I am very excited about bringing to Canada a fresh perspective and a range of experiences gathered from my tenure in one of the most respected commercial real estate organizations in the United States.”

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